Q2 2025 Oil States International Inc Earnings Call

Thank you for standing by. My name is Jael and I will be your conference operator. Today at this time I would like to welcome everyone to the oil States second quarter 2025 earnings call.

All lines have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, just press star 1 again.

Ellen Pennington: Thank you, Jael. Good morning and welcome to Oil States Second Quarter 2025 earnings conference call. Our call today will be led by our President and CEO, Cynthia Taylor, Lloyd Hajdik, Oil States Executive Vice President and Chief Financial Officer, and Scott Moses, our Executive Vice President and Chief Operating Officer. Before we begin, we would like to caution listeners regarding forward-looking statements. To the extent that our remarks today contain information other than historical information, please note that we are relying on the safe harbor protections afforded by federal law. No one should assume that these forward-looking statements remain valid later in the quarter or beyond. Any such remarks should be weighed in the context of the many factors that affect our business, including those risks disclosed in our 2024 Form 10-K, along with other recent SEC filings.

I would now like to turn the conference over to Ellen Pennington uh, VP of Human Resources. You may begin

Thank you, JL. Good morning and welcome to oil. State's second quarter 2025 earnings conference. Call our call today will be led by our president and CEO Cindy Taylor Lloyd, hodduk Oil States, Executive Vice, President, and Chief Financial Officer. And Scott, Moses are Executive Vice, President and Chief Operating Officer. Before we begin, we would like to caution listeners regarding forward-looking statements to the extent that our remarks today contain information, other than historical information. Please note that we are relying on the Safe Harbor protections afforded by federal

Law. No 1 should assume that these 4 were looking statements remain valid later in the quarter or Beyond.

Ellen Pennington: This call is being webcast and can be accessed at Oil States' website. A replay of the conference call will be available two hours after the completion of this call and will continue to be available for 12 months. I will now turn the call over to Cindy.

Cynthia Taylor: Thank you, Ellen. Good morning and thank you for joining our conference call today, where we will discuss our second quarter 2025 results and provide our thoughts on market trends in addition to discussing our company's specific strategy and outlook. In a quarter marked by geopolitical instability, lower crude oil prices, and fluctuating U.S. trade policies, offshore and international markets demonstrated resilience. With this backdrop, the company performed well, achieving the midpoint of our guided EBITDA range for the second quarter of 2025 due to our product and service mix. Our consolidated results in the second quarter were driven by continued strength of international and offshore activity, supported by backlog growth over recent quarters. Oil States remains well-positioned to benefit going forward as oil and gas operators favor capital allocation to offshore projects with higher production, slower decline curves, and lower breakevens.

Any such remarks should be weighed in the context of the many factors that affect our business, including those risks disclosed in our 2024 form 10 K along with other recent SEC. Filings, this call is being webcast and can be accessed at oil, State's website. A replay of the conference. Call will be available 2 hours after the completion of this call and will continue to be available for 12 months. I will now turn the call over to Cindy.

Thank you Alan. Good morning and thank you for joining our conference call today where we will discuss our second quarter, 2025 results and provide our thoughts on market trends, in addition, to discussing our company, specific strategy and Outlook

In a quarter marked by geopolitical instability lower crude oil prices and fluctuating us trade policies. All Shore and international markets, demonstrated resilience.

With this backdrop, the company performed well achieving the midpoint of our guided evida range for the second quarter of 2025 due to our product and service. Mix.

Cynthia Taylor: During the second quarter, 72% of our consolidated revenues were generated from offshore and international projects, up significantly sequentially and year over year. This shift in revenue mix reflects our strategic actions to grow our international project-driven revenues, as well as our continuing initiative to optimize our U.S. land operations, given lower industry activity levels and competitive market dynamics. U.S. land drilling and completion activity declined significantly during the period, with the quarter-end rig count down 8% and the frac spread count down 14% from March 31, 2025. These U.S. activity reductions stem from weaker crude oil prices driven by ongoing macroeconomic uncertainty and OPEC Plus' decision to rapidly unwind over 2 million barrels per day of previous production cuts. The sustained margin benefits stemming from our U.S.

Our Consolidated results in the second quarter were driven by continued, strength of international and offshore activity supported by backlog growth over recent quarters. Oil States remains well, positioned to benefit going forward as oil and gas operators, favor, Capital, allocation to Offshore projects with higher production. Slower decline, curves and lower break evens.

During the second quarter 72% of our Consolidated, revenues were generated from offshore and international projects up significantly sequentially and year-over-year.

Patients were given lower industry activity levels and competitive market dynamics.

Us land Drilling and completion, activity declined, significantly. During the period, with a quarter, end rig count down 8% and the fra spread countdown 14% from March 31st 2025. These us activity, reductions stem from weaker crude oil, prices driven by ongoing macroeconomic, uncertainty and OPEC pluses decision to rapidly unwind over 2 million barrels per day, of previous production cuts.

Cynthia Taylor: land-based optimization efforts, which were initiated in 2024 and have continued into 2025, are reflected in our results, albeit tempered by the significant decline in U.S. oil-directed activities during the second quarter. Driven by strong demand across our international and offshore markets, our offshore manufactured product segment delivered strong performance. Revenues increased 15% sequentially, while adjusted segment EBITDA rose 18%. Backlog increased to 363 million, again allowing us to achieve our highest level since September 2015. Robust bookings of $112 million, reflective of continued strength in offshore project activity, yielded a quarterly book-to-bill ratio of 1.1 times and a year-to-date ratio of 1.2 times, reinforcing our sustained backlog build. The strength and diversity of our backlog supports our outlook for total company incremental revenue and earnings growth over the balance of 2025.

The sustained margin benefits stemming from our us, land-based optimization efforts which were initiated in 2024 and have continued into 2025, are reflected in our results. Albeit tempered by the significant decline in US oil directed activities during the second quarter.

Driven by strong demand across our international and offshore markets, our offshore manufacturer product segment delivered strong performance. Revenues increased 15% sequentially while adjusted segment EBITDA rose 18%. Backlog increased to $363 million, allowing us to achieve our highest level since September 2015.

Robust, bookings of 112 million, reflective of continued, strength, and offshore project activity yielded. A quarterly book to Bill ratio of 1.1 times and a year-to-date ratio of 1.2 times.

Cynthia Taylor: Our completion and production services and downhole technology segments, which represent a smaller portion of our business mix, experienced sequential quarter revenue declines of 15% and 10% respectively, primarily due to the significant industry-wide reduction in U.S. land-based activity levels. Responsive to market conditions, we made the strategic decision to exit three additional land-based facilities during the second quarter and to further reduce our U.S. land-focused workforce. During the second quarter, we grew our cash flow from operations 61% sequentially, and we generated $8 million of free cash flow. Free cash flow, together with cash on hand, was used during the quarter to repurchase $7 million of our common stock and $15 million of our convertible senior notes. Our deleveraging efforts should unlock additional equity value to our stockholders as we approach net deck zero and pay off our convertible senior notes at their maturity in April 2026.

Reinforcing our sustained, backlog, build the strength and diversity of our backlog. Supports. Our outlook for total company, incremental, revenue and earnings growth over the balance of 2025.

Our completion and Production Services and downhole Technology segments, which represent a smaller portion of our business. Mix experience, sequential quarter Revenue, declines of 15% and 10% respectively primarily due to the significant industrywide reduction in US, land-based activity levels.

Responsive to market conditions, we made the Strategic decision to Exit 3 additional land-based facilities during the second quarter. And to further reduce our us land focused Workforce.

During the second quarter, we grew our cash flow from operations 61% sequentially, and we generated $8 million in free cash flow.

Free cash flow together with cash, on hand was used during the quarter to repurchase 7 million of our common stock and 15 million of our convertible senior notes.

Cynthia Taylor: Our capital expenditures in the second quarter were elevated by the ongoing construction of our new manufacturing facility in Batam, Indonesia, which will complete in the third quarter, along with the manufacture of our low-impact workover rental riser equipment built pursuant to contracts. We are committed to optimizing our operations and making targeted investments in our highest performing operations while leveraging cutting-edge technologies to drive growth. Our commitment to technology and innovation was once again honored with a 2025 Meritorious Engineering Award from HeartEnergy, recognizing our low-impact workover package, which I mentioned earlier. This solution integrates proven field technologies to enhance subsea plug and abandonment operations while ensuring the integrity of aging wells. Lloyd will now review our operating results along with our financial position in more detail.

Our deleveraging efforts should unlock additional Equity value to our stockholders as we approach. Net deck, zero, and pay off our convertible senior notes at the maturity in April 2026. Our Capital expenditures in the second quarter were elevated by the ongoing construction of our new manufacturing facility in Baton Indonesia, which will complete in the third quarter, along with the manufacturer of our low impact, workover rental, Riser equipment built pursuant to contracts.

We are committed to optimizing our operations and making targeted investments in our highest performing operations.

While leveraging cutting edge Technologies to drive growth?

Our commitment to technology and innovation was once again honored with a 2025 Meritorious Engineering Award from Hart Energy, recognizing our low-impact workover package, which I mentioned earlier. This solution integrates proven field technologies to enhance subk plug and abandonment operations while ensuring the integrity of aging wells.

Lloyd Hajdik: Thanks, Cindy. Good morning, everyone. During the second quarter, we generated revenues of $165 million and adjusted consolidated EBITDA of $21 million. Net income totaled $3 million or 5 cents per share, which included facility exit, severance, and other charges and credits totaling $3 million. Our adjusted net income totaled $5 million or 9 cents per share after excluding these charges and credits. Our offshore manufactured product segment generated revenues of $107 million and adjusted segment EBITDA of $21 million in the second quarter. Adjusted segment EBITDA margin was 20% in the second quarter compared to 19% in the first quarter. In our completion and production services segment, we generated revenues of $29 million and adjusted segment EBITDA of $8 million in the second quarter. Adjusted segment EBITDA margin was 28%, benefiting from facility and equipment sale gains in the second quarter compared to 25% in the first quarter.

Lloyd will now review our operating results along with our financial position in more detail.

Thanks Cindy. Good morning, everyone.

During the second quarter, we generated revenues of 165 million and adjusted Consolidated ebida of 21 million.

Net income total $3 million for 5 cents per share.

Which included facility, exit Severance and other charges and credits totaling 3 million.

Our adjusted net income, total 5 million or 9 cents per share after excluding these charges and credits.

And adjusted segment. Eva de of 21 million in the second quarter.

Adjust, the segment eidon margin was 20% in the second quarter.

Compared to 19% in the first quarter.

In our completion and Production Services segment.

We generated revenues of 29 million and adjusted segment Eva de of 8 million in the second quarter.

Lloyd Hajdik: During the quarter, the segment recorded facility exit and other restructuring charges totaling $2 million. In our downhole technology segment, we generated revenues of $29 million and $1 million of adjusted segment EBITDA in the second quarter. During the quarter, the segment recorded a non-cash operating lease and asset impairment charge of $1 million, as well as severance charges. We generated $15 million of cash flow from operations in the second quarter. Our cash flows were used to fund $10 million of CapEx, which was offset by $3 million in proceeds from the sale of idle properties and equipment. During the quarter, we repurchased $7 million of our common stock under our current share repurchase authorization. In addition, we purchased $15 million of our convertible senior notes at a slight discount.

Adjustment SE segment, evida margin was 28%, benefiting from facility and Equipment sale gains in the second quarter compared to 25% in the first quarter.

During the quarter, the segment recorded facility, exit, and other restructuring charges totaling $2 million.

In our downhill technology segment.

We generated revenues of 29 million and 1 million of adjusted segment ibida in the second quarter.

During the quarter of the segment recorded, a non-cash operating lease and asset impairment charge of $1 million as well as Severance charges.

We generated 15 million dollars of cash flow from operations in the second quarter.

Our cash flows were used to fund 10 million dollars of capex.

Which was offset by $0 million in proceeds from the sale of idle properties and equipment.

During the quarter. We repurchased 7 million of our common stock under our current share repurchase authorization

Lloyd Hajdik: As a testament to our strong financial position as of June 30th, we maintained a solid cash on hand position with no borrowings outstanding the company's asset-based revolving credit facility. On July 28th, we amended our revolving credit facility to provide for additional borrowing availability, to lower interest charges, and to plan for the retirement of our remaining convertible senior notes at maturity in April 2026. We intend to remain opportunistic with additional purchases of our common stock and convertible senior notes, given our solid free cash flow outlook, and will continue to prioritize returns to stockholders. Now, Cindy will offer some market outlook concluding comments.

In addition, we purchased 15 million of our convertible senior notes at a slight discount.

As a testament to our strong financial position, as of June 30th, we maintained a solid cash on hand position with no bearing outstanding. The company's asset base revolving credit facility.

On July 28th. We amended our revolving credit facility.

To provide for additional baring availability.

To lower interest charges and to plan for the retirement of our remaining convertible senior notes at maturity in April 2026.

We intend to remain opportunistic with additional purchases of our common stock, and convertible senior notes.

Given our solid free cash flow Outlook, and we'll continue to prioritize returns to stockholders.

Cynthia Taylor: Despite recent economic volatility and the imposition and uncertainty around new trade tariffs, we continue to see strong demand for our offshore and international products and services. Our backlog remains at a decade-high level, and we anticipate continued strength in future bookings and have confidence in our offshore project execution. Industry analysts have suggested that while U.S. land-based activity may remain subdued, offshore and international markets are expected to lead upstream growth. Analysts have also highlighted a global pivot towards exploration and offshore development, driven by the need for lower cost, lower carbon resources. As it relates to guidance, based on what we know today, we are maintaining our full-year EBITDA guidance in a range between $88 million to $93 million. However, our revenue guidance needs to be updated for the streamlining of our U.S. land operations, which will reduce our full-year revenue range to $685 million to $700 million.

Now, Cindy will offer some Market Outlook including comments.

Certainty around.

New trade tariffs, we continue to see strong demand for our offshore and international products and services. Our backlog remains at a decade, high level. And we anticipate continued strength and future, bookings, and have confidence in our offshore project execution.

Industry analyst has suggested that while us land-based activity, May remain subdued offshore and international markets are expected to lead. Upstream growth analysts have also highlighted a global pivot towards exploration and offshore development driven by the need for lower cost lower carbon resources.

Cynthia Taylor: Our margins will improve with the high grading of our business mix, along with cost reduction initiatives. Our third quarter guidance calls for revenues in a range of $165 million to $170 million and EBITDA of $21 million to $23 million. Strong projected cash flow from operations, which are still expected to be in a range of $65 million to $75 million for the full year, underscores Oil States' free cash flow yields, which is one of the most attractive across our peer group. Our business mix and capital allocation strategies are purpose-driven. We are investing in innovation that provides meaningful advancements to customer operations, driving solid results through project execution, generating significant cash flow that strengthens our balance sheet while unlocking equity value for our stockholders. At the same time, we're building solutions that help our customers thrive in a dynamic world.

As it relates to guidance based on what we know today, we are maintaining our full year EVA dog guidance in a range between $88 million to $93 million. However, our revenue guidance needs to be updated for the streamlining of our U.S. land operations, which will reduce our full year revenue range to $685 million to $700 million.

Our margins will improve with the high-grading of our business. Mix along with cost reduction initiatives, our third quarter guidance calls for revenues and a range of 165 to 170 million and ibida of 21 to 23 million.

Strong projected cash flow from operations.

Which are still expected to be in a range of 65 to 75 million. For the full year. Underscores Oil States, free cash flow yields which was 1 of the most attractive across our peer group.

Cynthia Taylor: These decisions we make are focused on building a stronger, more resilient company that drives meaningful results for those we serve. That completes our prepared comments. Jael, would you open up the call for questions and answers at this time?

Our business mix and capital. Allocation strategies are purpose-driven. We are investing in Innovation that provides meaningful advancements to customer operations, driving solid results through project. Execution generating significant cash flow, that strengthens our balance sheet while unlocking Equity value for our stockholders. At the same time, we're building solutions that help our customers thrive in a dynamic World. These decisions we make are focused on building a stronger more resilient company that drives meaningful results for those. We serve

Jael: Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. And again, to ask a question, it is star one. Your first question comes from the line of Jim Rawlison of Rimmin James. Your line is open.

Call for questions and answers at this time.

Thank you. The floor is now open for questions if you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue.

If you would like to withdraw your question, simply press star 1 again.

If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

And again, to ask a question it is star 1.

Jim Rawlison: Hey, good morning, Cindy and Lloyd. How are you guys today?

Your first question comes from the line of Jim Rollins of Raymond, James, your line is open.

Ellen Pennington: Good, good, Jim. Doing well.

Jim Rawlison: Cindy, maybe circling back to offshore, you know, listening to some of the commentary through this earnings season so far, generally, most people seem to have suggested everything still seems to be on the same track there, and most of the uncertainty seems to be hitting the shorter cycle markets like the U.S. land market you mentioned. Just love to hear, you know, the kind of color from conversations you've had because you made a comment that everything seems to be on track that fits with what everybody's saying. There have been some talking about, you know, some decisions getting pushed into next year just from a timing and because of the uncertainty, but it doesn't sound like that's impacting you. Just love to get whatever you could expand on that, if you don't mind.

Hey, good morning, Cindy and Lloyd. How are you guys today? Good. Good Jam doing well.

Cynthia Taylor: No, I'd be happy to. And, you know, it's hard for me to speak for other companies on the pushing of projects, but my supposition is likely that this is discretionary type investments could be for drilling offshore drilling rig equipment or a number of other kind of new opportunity sets, whereas ours is much more weighted to production infrastructure associated with these large fields that have already been drilled and discovered. And so this tends to be, these are multi-year, multi-decade type developments, and we have a lot of individual project visibility that these don't really derail on short-term, you know, macroeconomic issues.

Cindy maybe circling back to Offshore, you know, listening to some of the commentary through this earning season so far. Um, generally most people seem to have suggested everything still seems to be on the same track there. And, and most of the uncertainty seems to be hitting the shorter cycle markets, like, the US land market, you mentioned, just love to hear, you know, the kind of color from conversations you've had because you made a comment that everything seems to be on track that fits with what everybody is saying. There have been some talking about, you know, some decisions getting pushed into next year, just from a timing and because of the uncertainty, but it doesn't sound like that's impacting. You just love to get whatever you could expand on that. Uh, if you don't mind,

Cynthia Taylor: I think that's the real difference is probably discretionary, likely more upgrades, drilling rig equipment, consumables versus, you know, large project production infrastructure, which has really been the driver, primary driver of our backlog growth, although we've had several different products, including new products come into our backlog, such as our new NPD system. So it's probably a combination of the type of equipment we offer the market and benefits of new technology brought to market. And I should take the opportunity too to say that our bookings outlook remains robust, and we do fully expect that the balance of the year will continue to lead to a book-to-bill north of one.

No, I'd be happy to. And, you know, it's hard for me to speak for other companies on the pushing of projects. But my supposition is likely that this is discretionary type Investments, could be for, uh, drilling offshore drilling rig equipment or a number of other kind of new opportunity sets. Whereas ours is much more weighted to production infrastructure associated with these large fields that have already been drilled into discovered. And so this tends to be um these are multi-year multi- decade type developments and we have a lot of individual project visibility uh that these don't really derail on short term, um, you know, macroeconomic issues. I think that's the real difference is probably discretionary likely, more upgrades drilling rig equipment, consumables versus, um, you know

You know, large project production infrastructure, which is really been the driver primary driver of our backlog growth, all the way, we've had several different products, including new products come into our backlog, such as our new MPD system. So it's probably a combination of the type of equipment. We offer the market and benefits of new technology brought to Market.

Jim Rawlison: Yep, that's great to hear. And Cindy, any updated view, or Lloyd, any updated view on kind of tariff impacts just given, you know, a few changes since the last quarter?

Got it helpful. I like I I should type the opportunity to to say that our bookings Outlook remains robust and we do fully expect that the balance of the year, will continue to lead to a book to build north of 1.

Cynthia Taylor: I'm happy to. Right now, we just don't anticipate a material impact from the tariff situation given our variety of global supply sourcing, number one, and two, the fact that a lot of our projects can be manufactured anywhere in the world, and then they are shipped into international locations. The one area that will probably have modest cost increases is actually in the downhole, the perforating side of the business, which, as you know, is rather small for us.

Yep. That's that's great to hear Infinity any updated view or or or Lloyd, any updated view on, kind of tariff. Impacts just given, you know, a few changes since the last quarter

Jim Rawlison: Yep, absolutely. And last one, just on the cash flow, free cash flow outlook, Lloyd, you mentioned kind of reiterated the $65 million to $75 million of cash flow from operations, and your CapEx obviously in 2Q was a little more, you know, heavy relative to 1Q. And my recollection was your kind of annual CapEx guidance was somewhere in the $25 million ballpark. Just trying to circle back on what your CapEx view is so I can, you know, we can back into where free cash flow should come out for the full year.

Uh, I'm happy to right now. We just don't anticipate a material impact, uh, from the Tariff situation given our variety of Global Supply sourcing number 1 and 2, the fact that a lot of our projects can be manufactured anywhere in the world and then they are shipped uh, into International locations. The 1 area that will probably have modest cost increases is actually in the downhole to the Perforating side of the business which is you know, is rather small for us.

Yep. Absolutely. And and last 1 just on the cash flow. Free cash flow Outlook. Uh, Lloyd you mentioned kind of reiterated the 65 to 75 million of cash flow from operations and, and your capex. Obviously, in 2q was a little more, you know, heavy, uh, relative to to 1 queue and and my recollection was your kind of annual capex. Guidance, was somewhere in the 25 million ballpark, just trying to Circle back on what

Lloyd Hajdik: Yeah, great, Jim. We're going to guide to CapEx about $30 million because we were a little higher in the second quarter for the completion of the Batam and some specific belt riser equipment for customer contracts.

Your capex view is so I can you know we can back into we're a free cash flow should come out for the full year.

Cynthia Taylor: Yeah, and the Batam spending was in our plans, but what's new is this low-impact workover riser, and again, this is equipment built for future revenue streams. So perfectly logical that we would up that guided CapEx range for this is special spending pursuant to contracts.

Jim Rawlison: Right. That also wasn't, what wasn't in your guide necessarily was some additional proceeds from asset sales, which had been, you know, at least partially offsetting that incremental $5 million, right?

Ending pursuant to contracts, right?

Cynthia Taylor: That's correct, and that's likely to continue as we exit some of these land-based operations. We'll have excess equipment, excess inventory, and facilities to monetize. As you know, a lot of that monetization will take time. And so we don't have that in our forward guidance.

Jim Rawlison: Yep, perfect. Thank you, guys. Appreciate it.

Right, but also wasn't what wasn't in your guide necessarily was some additional proceeds from asset sales which have been you know, at least partially offsetting that incremental 5 million, right? That's correct. And that's likely to continue as we can exit. Some of these Land Based operations will have excess equipment, excess inventory and Facilities to monetize. As you know, a lot of that monetization will take time. And so we don't have that in our forward guidance.

Jael: Your next question comes from the line of Patrick Willett of Stifel. Your line is open.

Yep. Perfect. Thank you guys appreciate it.

Patrick Willett: Hey, it's Pat Willett on for Steve and Jagera. Thanks for taking the questions. Your revenue mix was about 72% offshore and international during the quarter. Do you have any idea what maybe a normalized mix is given the high grading of the U.S. product lines?

Your next question comes from the line of Patrick Willett of stifel. Your line is open.

It's paddle that on for Stephen Yeager. Thanks for taking the question.

Uh, your Revenue mix.

Cynthia Taylor: Yeah, it's going, that's a great question. And I probably will break that down a little bit for you in saying that of the 28% current land-based mix, about half of that comes from our downhole technology segment. A portion is military, so it's kind of not what we would think. And then the reality is the completion and production services segment, which if you all recall has Gulf of Mexico activity, land-based activity, and international activity. The land-based piece was really only about 11% or 12% per CPNS, which is really the area that we have done restructuring around. And so it's a much smaller piece of U.S. land-driven service activity than probably people will recognize.

2% offshore International during the quarter. Do you have any idea what? Uh, maybe a normalized mix is given the high grading of the US product lines.

Yeah, it's going. It's a great question, and I will probably break that down a little bit for you and say that.

Of the the 28% current land-based mix about half of that comes from our downhole Technologies segment.

Uh, a portion is military, so it's kind of not what we would think. And then, uh,

Patrick Willett: All right, great. That's really helpful. Thank you. As you continue to streamline the U.S. land operations, could you give us maybe any guidance on the puts and takes of soft current market conditions and your improving cost structure and how that impacts 2H25 margins?

The reality is the completion and Production Services segment, which if you'll all recall has Gulf of Mexico activity, land-based activity, and international activity. Uh, the land Pace piece was really only about 11 or 12% for cpns, which is really the area that we have done restructuring around. And so it's a much smaller piece of us land driven service activity uh than probably people build recognize.

All right, great. That's really helpful. Thank you.

Cynthia Taylor: Yeah, I'll look to Lloyd to kind of look to that and realize that the margin progression will accrete throughout the second half and be higher, quite frankly, into 2026. Again, for the reasons I just talked about, these are recent decisions to exit three facilities. Severance costs, some have been accrued, some will still come. And then we've got some move, relocation, sale of equipment, blah, blah, blah. So there'll be some ongoing drag on margins, but the go-forward margins, I'll look more towards 2026, should be in a range of what, Lloyd?

Uh, as you continue to streamline, the usland operations, could you give us maybe any guidance on the puts it takes of soft current market conditions and your improvement cost structure. Uh and how that impacts 2, H, 25 margin,

yeah I'll look to Lloyd to kind of look to that and realize that the margin margin progression uh will accrete throughout the second half and be higher quite frankly into 2026

Lloyd Hajdik: Upper 20s to low 30s.

Cynthia Taylor: Yeah. So noticeable, almost a doubling of our EBITDA margins by these actions.

Again, for the reasons I just talked about these are recent decisions to Exit 3 facilities, Severance cost had some have been accrued, some still come and then we got some move, relocation sale of equipment, blah, blah, blah. So, there'll be some ongoing drag on margins but the go forward margins. I'll, I'll look more towards 2026, should be in a range of what Lloyd, yeah, upper 20s to low 30s. Yeah,

No. So

on doubling of our Eva margins by these actions.

Patrick Willett: Great, thanks for the outlook there. I'll turn it back.

Cynthia Taylor: Thanks, Pat.

Great. Thanks for the Outlook there. I'll turn it back.

Jael: Your next question comes from the line of John Daniel of Daniel Energy Partners. Your line is open.

Thanks Pat.

Patrick Willett: Good morning, Cindy and Lloyd. Thanks for having me. The first one is just a housekeeping. Cindy, can you remind me what percent of the U.S. land-based business is tied to production versus D&C activity?

Your next question comes from the line of John. Daniel of Daniel Energy Partners, your line is open.

All right, good morning Cindy and Lloyd. Um, thanks for having me. Uh, the first 1 is just a housekeeping.

Cindy can you remind me? What percent of the US land-based business is tied to production versus DNC activity

Cynthia Taylor: I'm going to say I attribute virtually everything we do to completions. Remember, we are completely out of flowback and well testing, which you might have said is I can put that in completions too, but we're completely out of that line. And so I'd say everything we have left is really focused on completion activity, zero drilling.

uh,

Patrick Willett: Right. Got it. Okay. And the second one, if you could wave a magic wand and get whatever land-based business you wanted, what would that be today and why?

I'm going to say I I attribute virtually everything we do to completion. Remember we are completely out of flow back and well, testing, which you might have said is I can put that in completions too, but we're completely out of that line. And so I'd say everything we have left is really focused on completion activity. Zero drilling, right? Got it.

Okay, and the second 1. If if you could wave a magic wand and get whatever land-based business you wanted, what would that be today? And why

Cynthia Taylor: Well, we have our downhole technologies, which you know, you can think perforating and plugs. These are downhole consumables. And while the market has been under competitive pressure, that is a really good long-term business to be in, again, because you consume it downhole and you can manage your cost structure a bit more readily than others. Our Tempris product line is absolutely a market-leading technology for the drill out of plugs during completion operations, and I would put my money right there.

Patrick Willett: Okay. Got it. And then it's pretty easy for us to see like when a frac company shuts down or a workover company shuts down. I don't always see what happens on some of the niche tool businesses, if you will. I'm curious, are you seeing any type of headaches with some of your competitors on those product lines where there might be some?

I would put my money right there.

Okay, got it. And then it's

pretty easy for us to see like, when

A frat company shuts down or wherever a company shuts down. I don't always see what happens on, sort of the, the Nietzsche tool businesses, if you will, I'm curious, are you seeing any type of

Cynthia Taylor: What do you mean? Clarify niche tools.

Patrick Willett: Well, I'm just saying like it's just any type of like small tool rental businesses. It's when you drive around, I don't know, we write about it, like you'll see like a rig yard shut down or a frac yard shut down or a coal tubing person shut down. But I don't often hear about some of the smaller rental companies. And I'm just curious, like within some of the markets you compete, are you seeing maybe the competitive dynamics potentially getting more favorable to you because some of your less well-capitalized competitors maybe don't?

Headaches with some of your competitors on those those product lines, where there might be some, what do you mean to clarify Nietzsche tools?

Well, I'm just saying like it's just any type of, like, small tool, rental businesses. It's, you know, when you drive around, I don't know. We write about it. Like, you'll see, like a rigged yard shut down or crack, your yard, shut down or cool to be person shut down. But I don't often hear about some of the smaller rental companies and I'm just curious like within some of the the markets you compete.

Cynthia Taylor: Yeah, well, remember, this is only about 11% or 12% of my revenue mix today shrinking. And no, I'm just going to throw that out there. So I'm going to put the reverse in. You ought to look at what we are doing, which will farm up the market, but it'll farm it up for someone else.

Are you seeing maybe the competitive Dynamics potentially getting more favorable to you because some of your less well capitalized competitors.

Patrick Willett: Right. Okay.

Lloyd Hajdik: Because our focus is more international and offshore.

Maybe don't. Yeah. Well, I I remember I this is only about 11 or 12% of my Revenue. Mix today is drinking. I know, I'm just and no, I'm just going to throw that out there. So I'm going to put the reverse in. You ought to look at what we are doing, which will firm up the market, but it'll firm it up for someone else.

Cynthia Taylor: Correct.

Patrick Willett: No, I know. I'm just stocked as an old man guy here. Sorry. Just just digging in. Okay.

Right. Okay. It's our focus. More International and offshore. Correct. No, I I know I'm just stuck as an old man, not here. Sorry.

Cynthia Taylor: The market will farm up, but and there's lots of discussion about consolidating the land-based market, which is overdue. All I'm saying is that's not going to be what we do.

Patrick Willett: Fair. No, apparently fair enough. I just thought I'd get your, you guys are your wise and experienced. So I figured I'd test you with the questions. So thank you for having me.

Just, uh, just digging in. Okay, the market will farm up, but there's lots of discussion about consolidating the land base market, which is overdue. All I'm saying is, that's not going to be what we do.

There. No apparent. Fair enough. I just got to get your...

You guys are, you're wise and experienced. I figured I'd test your with the questions, so

Cynthia Taylor: Thank you, Jon.

Patrick Willett: Thank you, guys. Bye.

Thank you for having me.

Jael: Your next question comes from the line of Chuck Mendervino of Susquehanna. Your line is open.

Okay. Thank you. John you guys. Bye.

David Brown: Hi, good morning.

Cynthia Taylor: Morning, Chuck.

Your next question comes from line of Chuck Menino of susco, Hannah, your line is open.

David Brown: Good morning. So just a couple of questions. Number one, the guidance for the full year, it kind of implies a step up in revenues in the fourth quarter and also EBITDA. So I was just wondering if you could kind of touch on what's happening there, you know, to kind of get to that full-year number.

Hi. Good morning morning Chuck.

Cynthia Taylor: No, that's a very astute observation, and it's absolutely correct. It is going to be led by our offshore manufactured product segment, and most of it is based on backlog build. And you know, we've had a 1.2 year-to-date book-to-bill ratio. And so while you can always worry a little bit of whether they come in the fourth quarter or flip to the first based on material receipts, these are generally POC contracts, and they are generally in backlog. And so, but you're right, there is a step up in Q4 based on that.

Uh good morning. Um, so just a, a couple questions. Um, number 1, the guidance for the full year, it kind of implies a step up in revenues in the fourth quarter and also ibida. So I was just wondering if you could kind of touch on what's happening there, uh, you know, to kind of get to that full year number.

No, there. That's a very astute observation and it's absolutely correct. It is going to be led by our offshore manufacturer product segments. And uh, most of it is based on backlog, build. And we, you know, we've had a 1.2 year to date uh, book to Bill ratio. And so while you can always worry a little bit of whether they

David Brown: Got it. And then in the completion and production segment, I thought it was interesting that such a small piece of that is U.S. land business, just given the decline year over year in revenues in that segment. So I was just wondering what other aspect of that business kind of saw a sharp decline, or if you could just explain a little bit what's going on there. It sounds like it maybe was more than just the U.S. land piece that may have declined.

Come in the fourth quarter or flip to the first based on material receipts. These are generally POC contracts and they are generally in backlog and so, um, but you're right. The, there is a step up in Q4 based on that.

Cynthia Taylor: Well, I think that the big point that I fear that maybe the street has missed a little bit is we are in a continual mode of exiting these commoditized product lines started last year where, you know, we had a decent flowback and well-testing business, certainly contributed to revenue, but contributed very little to EBITDA and maybe negative cash flow, probably was. That is no longer in our revenue mix. We have also announced, I can't remember if it's late last year or early this year, closure of various regions on our CPNS segment in the Northeast, in East Texas, and other regions, and we just announced three more. When you do that, yes, revenues come down, but given how marginal these operations were, they're not damaging our EBITDA, and they're actually improving our free cash flow.

Got it. Um and then in the completion of production segment I thought it was interesting that that such a small piece of that is is US land uh business just given the decline year-over-year in Revenue in that segment. So I was wondering what other aspect of that business kind of saw a sharp decline or if you could just explain a little bit what's going on there? It sounds like it would maybe was more than just the US land piece, that may have declined.

Well, I think that your, the big point that I fear, that maybe the street is missed a little bit, is we are in a continual mode of exiting these commoditized product lines started last year where, you know, we had a decent flow back and well, testing business. Certainly contributed to revenue, but contributed very little to ibadan and maybe negative cash flow, uh, probably was that is no longer in our Revenue, mix. We have also announced, I can't remember if it's late last year or early this year closure of various regions on our cpns, uh, segment in the Northeast in East, Texas and other regions and we just announced 3 more.

David Brown: Yep, I did notice the substantial margin improvement there as well. Okay, that's all for me. Thank you.

When you do that yes revenues come down but given how marginal these operations were they're not damaging our ibida and they're actually improving our free cash flow.

Cynthia Taylor: Thanks, Chuck.

Yep. I did I did notice the uh the substantial margin Improvement there as well. Um okay those that's all for me. Thank you.

Jael: Your next question comes from the line of Stephen Gingaro of Stifel. Your line is open.

Thanks, Chad.

Stephen Gingaro: Thanks. Good morning, everybody. I apologize if I missed this because I joined late, but I was curious, on the offshore side and on the order flow side, it's obviously been very good year to date. It sounds like from talking to others, there's a potential for a pretty solid uptick in offshore activity in '26 plus. Are you seeing that and any thoughts on how we should be thinking about order flow for the next several quarters?

Your next question comes from the line of Steven Jarreau of Stifel. Your line is open.

Uh, thanks. Good morning everybody.

Cynthia Taylor: No, absolutely. And I think you did miss the comment I made that we are looking at a book-to-bill north of one throughout the balance of this year and do have optimism as we go into 2026. And we actually had some very good clarifying questions. I think it came from Jim in terms of kind of why are you different, meaning a lot of companies are kind of guiding down, but we're more long-cycle project-driven, production infrastructure-driven, not less so on shorter-term, you know, upgrades, refurbs of rig equipment and the like. I think the rig equipment exposure we have is very strategic, and it's new technology to market, particularly our NPD type assets. And that was a new, basically, product introduction made early last year.

On the order Flow side. It's obviously been very good year to date. It, it sounds like from talking to others. There's, there's a potential for a pretty solid uptick in offshore activity in 26. Plus, are, are you seeing that? And and, and any thoughts on how we should be thinking about order flow for the next several quarters.

Cynthia Taylor: It's got great reception in the market from a variety of customers, but I would mention SeaDrill in particular, which we have some joint marketing videos out there that really talk about the differentiation of the equipment in the market. We have recently introduced a low-impact system for P&A operations that we think is unique and improved technology. And it's for older wellheads, and it could be any wellhead, but certainly had an advantage for older wellheads that elevated our CapEx, but that investment was made pursuant to contracts with customers. And that's why we upped our CapEx guided from 25 to 30. But you know, a large proportion of our spending, probably 50%, is unique and expansionary, i.e., the Batam facility, as well as this new intervention riser that we plan to take to market on a rental basis.

No. Absolutely. And I think you did miss the comment. I made that we are, uh, looking at a booked Bill north of 1 throughout the balance of this year and do have optimism as we go into 2026. Um, and we actually had some very good clarifying questions. I think it came from Jim and terms of kind of, why are you different meaning? A lot of companies are kind of guiding down, but we're more along, cycle project driven production, infrastructure, driven, not less. So, on shorter term, um, you know, upgrades refurbs of RI rig equipment and the, like, I think, the rig equipment exposure. We have is very strategic, and it's new technology to Market, particularly our MPD type assets. And, um, that was a new, uh, basically product introduction made early last year. It's got great reception in the market from a variety of customers, but

I would mention seed drill in particular. Um,

Stephen Gingaro: Great. Thanks. And the other quick question, that's a little scary because I just looked back at my model and it goes back to 2001, I think, at the offshore products margins over the years. Is that range, like when you think about sort of a range in '25 and '27, you had a nice uptick in the second quarter. Is that, you know, kind of give or take 20% range, something that we should probably be modeling in for the next year or two? Or do you think there's potentially upside to that as absorption maybe is a little higher?

Which we have some joint marketing me videos out there that really talk about the differentiation of the equipment in the market. Uh, we have recently introduced a low impact system for PNA operations that we think is unique and improved technology and it for older wellheads and it could be any Wellhead but certainly at had an advantage for older wellheads um that elevated our capex but that investment was made pursuant to contracts uh with customers. And that's why we upped our capex, guided from 25 to 30. But you know, a large proportion of our spending, probably 50% is unique and expansionary.

Cynthia Taylor: I would probably model in.

Patrick Willett: 20 to '22.

Great. Thanks. And and the other quick question, that's a little scary because I just looked back at my model and it goes back to 2001. I think at the at the offshore products margins over the years is, is that range. Like when you think about sort of a range in 25 to 27, you were, you had a nice uptick in the second quarter is that, you know, kind of give or take, 20% range. Something that we should probably be modeling in for the next year or 2 or you think there's potentially the upside to that is absorption? Maybe.

Cynthia Taylor: 20 to '22. We have a five-year model, and obviously what a real driver for improved margin is steady, consistent throughput through our facilities. But as backlog builds, we should get that. There's always some mix issues depending on which product has the higher weighting in a given quarter. But overall, and you've been with us a long, long time, probably our historical margins over two decades in that segment were somewhere from about 13 to 17. And now we, and if you look over the last five years, our revenue growth, our EBITDA growth, and our margin progression has been very favorable in that segment. And now we're more sustained and have been around kind of 19 to 20%. But if revenue continues to grow and expand as we think it will, those could accrete up to 21 to 22% over time.

Is a little higher. I would probably model in 20 to 22, 20 to 22. We, we have a 5 year model and obviously what a real driver for improved margin is steady, consistent throughput through our facilities. But as backlog builds, uh, we should get that. There's always some mixed issues depending on which product has the higher weighting in a given quarter. But overall, and you've been with us, a long, long time probably our historical margins, over 2 decades. In that segment were somewhere from about 13 to 17. And now we and if you look over the Last 5 Years, our Revenue growth, our Eva dog growth, and our margin progression, has been very favorable in that segment and now we're more sustained and have been around kind of 19 to 20%. But if Revenue continues to grow and expand as we think it will, those could agreed up to 20.

Stephen Gingaro: Great. No, that's great color. Thank you.

21 to 22% over time.

Cynthia Taylor: Thank you.

Patrick Willett: Thanks, David.

Great. Now, that's a great color. Thank you.

Jael: That concludes our Q&A session. I will now turn the conference back over to Cindy for closing remarks.

Thank you. Thanks. David.

Cynthia Taylor: All right. Jael, thank you so much for helping us host the call today. And I do thank all of you for your time and joining us. We attempted to communicate during this call is that we are focused on the right end markets. We're getting leaner by design, and we're being more selective about our capital allocation strategies. With that backdrop, we expect to see higher EBITDA margins and enhanced cash flows, all efforts that should benefit our stockholders. Thanks and have a great day.

That concludes our Q&A session. I'll talk to the conference back over to Cindy for closing remarks.

All right. Uh, JL, thank you so much for helping us host the call today, and I do thank all of you for your time enjoying us, we attempted to communicate during this call, is that we are focused on the right in markets. We're getting leaner by Design and we're being more selective about our Capital allocation strategies with that backdrop. We expect to see higher ibaon, margins, and enhance, cash flows. All efforts that should benefit our stockholders.

Jael: This concludes today's conference call. You may now disconnect.

Thanks, and have a great day.

This concludes today's conference call, you may now disconnect